Making business preparations for the uncertain year ahead

Usually the fourth quarter of every fiscal year is the time I work with clients on planning exercises for the next fiscal year— creating budgets, developing sales projections, making organizational chart adjustments, and so on. We study the economy as a whole, look at industry-specific trends, budget for capital expenditures, analyze health costs and increases, assess projected employee absences, and update the company’s strategic plan. The goal is to develop an executable strategy that will deliver results in spite of unplanned events, political activities, and economic fluctuations throughout the year.

Are you laughing at me yet? At this point in 2020 (mid-September) is anyone willing to step forward with a road map for 2021? Is anyone willing to sign their name to a list of goals and performance expectations? Ok, I understand, and, frankly, I am feeling the same frustration. But, my clients hire me to push their business forward, and I don’t compromise on planning. To quote Benjamin Franklin, “If you fail to plan, you are planning to fail!”

I am a firm believer that persistence always wins the day. Many accomplished professionals get to the top because they simply refuse to give up. With that said, after some pep talks and attitude adjustments, mostly with myself, I have push forward with 2021 planning exercises.

Strategic Plan

The company strategic plan must be updated before the end of the year. Each member of the company’s leadership team, the C-level folks, should have three to five measurable goals each year that move the business along on a five-year strategy. These get rolled out to departmental managers so they can develop deliverables to support goal achievement. All needed activities and tasks should be documented in departmental strategic plans that support the overall company road map.

Sales Projections

This is the activity most often absent from company planning exercises. Many businesses do not complete revenue projections, but sales-driven organizations certainly do. The revenue outlook drives decision-making in all other areas of the business, so projecting income is critical.

Sometimes this is driven from the top. In some cases, business owners have a desired percentage of growth and assign quotas to the salespeople, who assign them to specific customers. I recommend a bottom-up approach. I look at customers individually—paying attention to historic performance, current industry trends, and customer-specific projects that will increase revenue— then assign an expected revenue target to each. Once a projection is completed for each customer, this is rolled up to the overall company growth number.

I also recommend breaking the annual projection down to monthly projections. Many customers exhibit a seasonality in demand, so their buying behavior ebbs and flows throughout the year. Taking these trends into account helps to preserve cash flow.

Budgeting

Once you have estimated the annual revenue, you can budget for spending and set margin goals. I’m a fan of zero-based budgeting, but there are many effective approaches. Define all projected expenditures by department and roll them into the company profit and loss projection. The executive team should analyze margin on a monthly basis at a minimum. Having a set budget and disciplined analysis allows the team to make decisions throughout the year as things change. And they will.

COVID-19 in 2021

At this point, the impact of COVID-19 should be included in all planning discussions. How will we sell digitally? What added expenses will be incurred for workplace safety? What are options for bench strength during employee absences? How do we host customers on-site safely? What resources do we need to add for sales? Print? Digital? What if COVID-19 cases increase to the point that the company must shut down for 30 days? What reserves are necessary and available to cover expenses if revenue is cut off temporarily? This will likely be at least 50% of the discussion.

The feedback I’m getting from clients and industry colleagues is “Optimism for 2021.” I agree. I mean, why not? I hate to even suggest this, but can it really get worse? Beyond that basic observation, data-driven analysis of the economy and business climate is generally pointing to recovery for next year.

My advice for next year? Push forward, and plan as if this could be your best year yet.